Compute the Expected Return Given These Three Economic States, Their

question 89

Multiple Choice

Compute the expected return given these three economic states, their likelihoods, and the potential returns: $$\begin{array} { | l | c | r | } \hline \begin{array} { l } \text { Economic } \\\text { State }\end{array} & \text { Probability } & \text { Return } \\\hline \text { Fast Growth } & 0.3 & 40 \% \\\hline \text { Slow Growth } & 0.4 & 15 \% \\\hline \text { Recession } & 0.3 & - 15 \% \\\hline\end{array}$$

• A)13.5 percent
• B)22.5 percent
• C)18.3 percent
• D)40.0 percent

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Definitions:

Quick Ratio

A metric to evaluate a company's short-term liquidity position, calculated by dividing liquid assets by current liabilities.

Working Capital

The difference between a company's current assets and current liabilities, indicating the liquidity of the business.

Acid-Test Ratio

The acid-test ratio, also known as the quick ratio, measures a company's ability to pay its short-term liabilities with its most liquid assets.

Quick Ratio

A liquidity measure indicating a company's ability to cover its current liabilities with its most liquid assets, excluding inventory.